Bitcoin is a decentralized digital currency that operates without the need for a central authority or intermediary. It is powered by a network of computers that validate transactions and maintain a shared ledger called the blockchain. Bitcoin was created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto and has since grown to become the most popular and widely used cryptocurrency in the world.
One of the main advantages of Bitcoin is that it offers a high degree of freedom and sovereignty to its users. Unlike traditional fiat currencies that are controlled by governments and central banks, Bitcoin is not subject to censorship, manipulation, inflation, or confiscation.
Bitcoin users can transact with anyone, anywhere, anytime, without relying on intermediaries or intermediaries. Bitcoin also enables financial inclusion and empowerment for people who lack access to traditional banking services or face economic instability in their countries.
However, Bitcoin also faces some challenges and limitations that hinder its adoption and scalability. One of the most prominent issues is the volatility of its price, which can fluctuate significantly in short periods of time due to supply and demand dynamics, market sentiment, regulatory uncertainty, and other factors. Another issue is the environmental impact of Bitcoin mining, which consumes a large amount of electricity and generates a lot of carbon emissions.
Moreover, Bitcoin transactions are not completely anonymous or private, as they can be traced and analyzed by third parties using blockchain analysis tools. Furthermore, Bitcoin users have to bear the responsibility of securing their own funds and private keys, as there is no recourse or recovery mechanism in case of loss or theft.
What Happens to Bitcoin Price if Spot ETF Isn’t Approved?
Bitcoin enthusiasts have been eagerly awaiting the approval of a spot exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC). A spot ETF would allow investors to buy and sell bitcoin directly through a regulated platform, without the need for intermediaries or custodians. This would potentially increase the liquidity, accessibility and legitimacy of the cryptocurrency market.
However, the SEC has repeatedly delayed or rejected applications for a spot ETF, citing concerns over market manipulation, fraud and investor protection. The latest deadline for a decision on the VanEck Bitcoin Trust, one of the most prominent proposals, is November 14, 2023. If the SEC does not approve it by then, it will have to either deny it or initiate a rule change process that could take several months.
So, what would happen to the price of bitcoin if the spot ETF were not approved? There are different scenarios and opinions on this question, but here are some possible outcomes:
The price drops temporarily but recovers quickly. Some analysts believe that the market has already priced in the low probability of a spot ETF approval, and that a rejection would not have a significant impact on the long-term trend of bitcoin.
They argue that there are other positive factors supporting the demand and adoption of bitcoin, such as institutional interest, innovation and regulation in other jurisdictions, and the growth of the decentralized finance (DeFi) sector. Moreover, they point out that there are already other types of bitcoin-related products available to investors, such as futures-based ETFs, trusts and funds.
The price drops significantly and stays low for a while. Some analysts believe that a spot ETF rejection would be a major blow to the credibility and confidence of the bitcoin market, and that it would trigger a sell-off among investors who were hoping for a positive outcome.
They argue that a spot ETF would have been a game-changer for the industry, as it would have opened the door to a massive influx of capital from retail and institutional investors who are currently deterred by the complexity and risk of buying and storing bitcoin directly. Moreover, they point out that the lack of a spot ETF could widen the gap between bitcoin and other asset classes, such as stocks and bonds, which have more regulated and diversified investment options.
The price does not change much or increases slightly. Some analysts believe that a spot ETF approval or rejection would not have a major impact on the price of bitcoin, as it is not the main driver of its value. They argue that bitcoin is primarily influenced by its own supply and demand dynamics, which are determined by factors such as its scarcity, security, innovation and network effects.
Moreover, they point out that bitcoin has shown resilience and growth in the past despite regulatory uncertainty and setbacks, and that it has proven to be uncorrelated with other asset classes, making it an attractive hedge against inflation and market volatility.
Despite these challenges, some visionaries and enthusiasts believe that Bitcoin has the potential to become a global standard for exchange and value storage, replacing or complementing the current system of fiat currencies and reserve assets.
They argue that Bitcoin offers a more transparent, fair, efficient, and resilient alternative to the existing monetary order, which is plagued by corruption, inefficiency, instability, and inequality. They also claim that Bitcoin can foster a more peaceful and harmonious world, as it reduces the need for wars, sanctions, trade wars, and currency wars.